AUD/USD regains 0.7200 as Ukraine-Russia, Fed woes battle China’s upbeat covid news

• AUD/USD picks up bids to refresh intraday high, extends the previous day’s rebound from fortnight low.
• Market sentiment remains sour amid mixed concerns over Ukraine-Russia peace talks and pre-Fed anxiety.
• Stocks in Hong Kong, China recover as daily virus infections ease in Beijing.
• Powell’s act of balancing rate-hike, US Retail Sales and risk catalysts are crucial for fresh impetus.

AUD/USD tracks recovery in most Asia-Pacific stocks while piercing the 0.7200 threshold to refresh intraday high during Wednesday’s Asian session. Even so, market’s anxiety ahead of the key Federal Open Market Committee (FOMC) and indecision over the Ukraine-Russia peace progress challenge the pair’s recovery moves.

In addition to the equities upbeat data at home also favor the AUD/USD prices. That said, Australia’s Westpac Leading Index improved to -0.15% from -0.3% prior.

Stocks in China and Hong Kong lead Asia-Pacific bulls as China reports an easing in the daily covid numbers. “China reports 1,952 new coronavirus cases on March 15 versus 3,602 a day earlier,” said Reuters.

Elsewhere, S&P 500 Futures drop 0.25% to 4,250 whereas the US 10-year Treasury yields snap seven-day uptrend around the highest levels since June 2019, down 1.5 basis points (bps) to 2.145% at the latest.

While portraying the bearish catalysts, the mixed signals over the Russia-Ukraine peace talks, false by their respective leaders could be cited as the major one. On the same line are the US data and the inflation expectations.

Although Ukrainian President Volodymyr Zelenskyy said on Wednesday that the positions of Ukraine and Russia at peace talks were sounding more realistic, per Reuters, Russian President Vladimir Putin said Kyiv is not serious about finding a mutually acceptable solution. Recent updates suggest that Ukraine is likely to request more weaponry helps from the US, which will be approved by US President Joe Biden, as signaled by the Wall Street Journal (WSJ). Hence, an absence of major progress in the talks and mixed comments keep troubling traders when they read the Russia-Ukraine crisis.

US Producer Price Index (PPI) matched YoY expectations of 10% growth whereas NY Empire State Manufacturing Index printed the biggest downside since May 2020. On the other hand, US inflation expectations from the record top, as signaled by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, dropped from the second consecutive day after refreshing the record top.

Looking forward, US Retail Sales for February, expected to ease to 0.4% from 3.8% prior, will join risk catalysts to direct short-term AUD/USD moves but major attention will be given to the Fed’s verdict.

Read: Fed Interest Rate Decision Preview: Is history a guide?

Technical analysis

Although an ascending trend line from late January 2022, around 0.7185, restricts the immediate downside of the AUD/USD prices, a daily closing beyond the 100-DMA level of 0.7218 becomes necessary to convince the bulls.